Q3FY21 Company Update - Vardhman Special Steel - ICICI Direct

Vardhman Special Steel (VSSL) reported a healthy set of Q3FY21 numbers on the back of strong demand from the automobile sector. Sales volume for the quarter was at 45964 tonnes, up 45% YoY, 4% QoQ. Topline came in at Rs. 288 crore, up 53% YoY, 16% QoQ. Ensuing EBITDA came in at Rs. 39.4 crore, up 87% QoQ, 564% YoY. EBITDA margin for the quarter was healthy at 13.7% (8.5% in Q2FY21, 3.2% in Q3FY20). Robust EBITDA performance was primarily on the back of increase in sales volumes, better realisations and higher operational efficiencies. Subsequent PAT for the quarter was at Rs. 21.7 crore (Rs. 8.9 crore in Q2FY21 and Rs. 1.8 crore in Q3FY20).

Valuation & Outlook

VSSL reported a healthy performance in Q3FY21 on the back of a smart recovery in demand from the automobile sector. Going forward, over the medium to longer term horizon, VSSL plans to focus on improving its RoCE. VSSL plans to achieve an RoCE of 20% by 2025. It plans to achieve the targeted RoCE by increasing its volumes and improving the net working capital. For FY21, VSSL is targeting to cross 14% RoCE. We value the stock at 6.5x FY22E EV/EBITDA and arrive at a target price of Rs. 140 (earlier target price of Rs. 112). We maintain our BUY recommendation on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_VardhmanSpSteel_CoUpdate_Jan21.pdf

Shares of VARDHMAN SPECIAL STEELS LTD. was last trading in BSE at Rs.117.5 as compared to the previous close of Rs. 119.1. The total number of shares traded during the day was 602 in over 21 trades.

The stock hit an intraday high of Rs. 119.65 and intraday low of 115. The net turnover during the day was Rs. 70932.

Source : Equity Bulls

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